PERMUTECH Vs. ORISSA HOUSING BOARD

JUDGEMENT

(1.) The petitioner calls in question legality of the action of opp. party Nos. 1 and 2 in placing orders with M/s. Macins (opp. party No. 3) for supply of filter for external water supply to Social Housing Scheme, Chhand, Phase II at Rourkela. Certain disturbing features were highlighted which need a detailed reference. After narrating tha facts, His Lordship observed : As indicated above, some disturbing factors have attracted our notice. Order was passed by the Chairman on -7 -1 -1993 for accepting the tender of the petitioner. Orders were accordingly placed on it and on the next day the Chairman came to a conclusion that there were allegations of manipulation. How the Chairman could notice that there was manipulation and on what basis he came to that conclusion is not forthcoming from the records. In any event, his specific order on 11 -1 - 1993 was that all the tenders were invalid and the Superintending Engineer and the Project Engineer (PH) were asked not to submit such invalid tenders without full examination. He, therefore, indicated that he shall obtain confidential opinion from the Chief Engineer, PH (Urban) Sawage Board. The opinion of the Chief Engineer, PH (Urban) so far as relevant is to the following effect: 'Different firms have quoted their rates. Since this pressure filters will be used for a drinking water supply scheme, it was felt that the filters should be purchased from reputed manu - facturers having adequate facilities of after -sales -services and supply of accessories for upgradation of the fiIteration plant it needed later. Considering all aspects it was felt that the offer of the firm offering Multi Grade Filters manufactured by M/s. Ion Exchange India Ltd., may be accepted. To make this Filteration Plant function effectively it may become necessary to use poty electrolyts coagulant aid to improve filtered water quality. It is recommended that vacuum type automatic gas chlorinators be procured and used for chlorinator of filtered water.' The opinion was given on 11 -1 -1993. This was seen by the Chairman on the very day, i. e., 11 -1 -1993 as endorsed on the opinion itself. The Chairman passed the following order that very day. 'I have requested Chief Enginneer, Public Health Shri S. K, Patnaik who is also a member of Orissa State Housing Board to give his valued suggestion regarding installation of MuHi -grade Filter at Chhand Phase II and Phase III Colony at Rourkela since all tenders were invalid for want of papers and clearance from sales -tax, income tax and PWD. During discussion Superintending Engineer, OSHB, Executive Engineer, PHD, OSHB were present. After discussion it was suggested by the Chief Engineer, Public Health that Ion Exchange (India) Limited Multi -grade Filter is the best in the counter for the present and more preferably good to instal at Chhand Phase U since the water is being drawn from Tata Quarry Lake. Technical examination and future safe -guards were also noted. This Multi -grade Filter should be capable of utilising Polyelectrolyte Coagulant in future. In future the water produced by the Multi -grade Fitter should be passed through Gas Chlorinators before it is supplied to the consumers. Therefore, it is decided on the technical advice of Shri Patnaik to have Ion Exchange (India) Ltd. Multi Grade Filter for Chhand Phase II and Phase III and ask the company for negotiation to reduce rate.'

(2.) Several things are significant in the note. All the tenders were treated to be invalid for want of the income -tax clearance certificate or the sales -tax clearance certificate or earnest money deposit. It was decided to have Ion Exchange (India) Ltd. Multi Grade Filter for Chhand Phase II and Phase III and the company was asked to negotiate to reduce the rate. Surprisingly that very day opp. party No. 3 submitted its offer along with the quotation price of Rs. 3,86,500/ - with reference to the discussion made with the Chairman and the Superintending Engineer. The speed with the matter has moved -leaves us baffled. On the very day, the Chairman recalled his order directing re -tender, he took a decision to have the confidential opinion from the Chief Engineer (PH)/Sewage Board. That very day the opinion was received from the engineer, and immediately Chairman passed order to negotiate with opp. party No. 3 to reduce the price. That very day opp. party No. 3 gave his offer, as if it was waiting in the wings. There is no mention in the file about any discussion between the Chairman and the Superintending Engineer with opposite party No. 3 as noticed from the letter of opp, party No. 3 dated 11 -1 -1993 in which a reference has been made by opp. party No. 3 to such discussion. If all these did happen on 11th January, 1993 what is intriguing is that the Chief Engineer on 12 -1 -1993 placed the' opinion of the Chief Engineer (PH) for consideration of the Chairman, as seen from page 42 of the file. He has clearly mentioned that since all the tenders were treated to be invalid, the tender offered by opp. party No. 3 was to be considered. The order of approval was made on 12 -1 -1993 From this it is clear that till 12 -1 -1993 the opinion of the Chief Engineer (PH) had not been placed for consideration of the Chairman. But from note of the Chairman which we have extracted above, it appears as if he had seen note on 11 -1 -1993. On 12 -1 -1993 the opinion was placed for consideration whether tender of opp. party No. 3 was to be considered. And supprisingly, opp. party No. 3's letter refers to a discussion on 11 -1 -1993 with the Chairman and has submitted revised offer. Further - more, the original tender of opp. party No. 3 could not have been con - sidered to be valid tender as requisite earnest money was not deposited. This is evident from the fact that on 12 -1 -1993 along with a letter of even date opp. party No. 3 has furnished NECS of Rs. 400/ -. It is accepted that the transportation charges which were required to be specifically indicated in the tender were not indicated by opp, party No. 3 while the original tender was submitted. Therefore, the Board was correct in its original conclusion that none of the tenders submitted was valid. However, subsequently the Board chose to act upon the tender of opp. party No. 3 without any sanction in law. The circumstances show that actions are not aboveboard and fair and there is more than meet the eyes. If all the tenders were invalid, the question of consideration of one of them did not arise. The petitioner made an assertion in Court that it could have also supplied the materials for which the orders were placed with opp. party No. 3. It is submitted that opp, party No. 3 is not manufacturer and the manufacturer, according to the Chief Engineers M/s Ion Exchange (India) Ltd. The learned counsel for opp. party No. 3 raises objection to the acceptability of the aforesaid submission stating that the petitioner has not taken such a stand in the writ application. By way of clarification the learned counsel for petitioner submitted that the petitioner has been writing to the Board to indicate the grounds for rejection. No reply was received and after the Board filed its counter affidavit, and the Learned counsel on its behalf produced the records before us, it came to know about the basis on which the rejection has been made We are not very much concerned with that aspect. But since tenders were invited from manufacturers, registered suppliers or authorised dealers, choosing opposite party No. 3 alone for negotiation (of which there is no record also), after treating all tenders to be invalid is indefansible.

(3.) We find no substance in the plea that the dispute being essentially related to a contract, we should no interfere. It is too late in the day to contend that disputes pertaining to contracts are not cognizable by the writ Courts. In M/s Kasturilal v. State of Jammu and Kashmir : AIR 1980 SC 1992, the Apex Court observed that where any governmental action fails to satisfy the test of reasonableness and public interest and is found to be wanting in the quality of reasonable - ness or lacking in the element of public interest, it would be liable to be struck down as invalid. As a necessary corollary it must be held that the Government cannot act in a manner which would benefit a private party at the cost of the State, as such an action would be both unreasonable and contrary to public interest. In the famous case of Ramana D. Shetty v. International Airpot Authority of India, AIR 1979 SC 1628, the principle was succinctly laid down to the effect that Government is not free, like an ordinary individual, in selecting the recipients for its largess and it cannot choose to deal with any person it pleases in its absolute and unfettered discretion. In Dusasana Pradhan v. Assistant Executive Engineer, Purl Irrigation Division and Ors. : Vol. 32 (1990) OJD 22 (Civil), it was observed by one of us (Pasayat,J.) that action contrary to law even though relating to contracts can be the subject -matter of adjudication in writ applications. It cannot be laid down absolute proposition that where the subject -matter of dispute relates to contract, the High Court is helpless while exercising the writ jurisdiction. It is an important facet as epitomised in Article 14 of the Constitution that every action of the executive Government must be informed with reason and should be from arbitrariness. That is the very essence of the rule of law and its bare minimal requirement. In The Gujarat State Divisional Corporation v. M/s Lotus Hotel Pvt. Ltd : AIR 1988 SC 348, the Apex Court deprecated the plea of non -availability of writ application in matters relating to contracts with these famous words : '.........It is too late in the day to contend that the instrumentality of the State which would be 'other authority' under Article 12 of the Constitution can commit breach of a solomn undsrtaking on which other side has acted and then contend that the party suffering by the breach of contract may sue for damages but cannot compel specific performance of the contract......... ' In Erosian Equipment and Chemicals Ltd. v. State of West Bengal : AIR 1975 SC 266, it was observed that in all cases of deal - ings by the Government with the public where interests sought to be protected is a privilege, it must be held that the State need not enter into any contract with any one, but if it does so,it must do so fairly without discrimination and without unfair procedure. In Ramana Dayaram's case (supra), it was held that the State cannot act arbitrarily in entering into relationship, contractual or otherwise with a third party, and its action must conform to some standard or form which is rational and non -discriminatory. It would depend on the facts and circumstances of each case and it would not be proper and equitable to provide any straitjacket formula. What is applicable to the State is equally to an authority under Article 12 of the Constitution. Undis - putedly opposite party No. 1 -Board is an authority under Article 12 in Ramana Dayaram's case(supra),the Apex Court has gone to the extent of | saying that arbitrariness in these matters would even attract Article 14 of the Constitution (see paras -21 and 27). Because of this, it was held that a rival in trade could approach a High Court challenging giving of a contract to some other if the same be arbitrary, or vitiated by any legal infirmity. It was pointed out (see paras -23 -26) that even where a tender note allows the authority to reject highest tenderer without assigning any reason, the choice cannot be unreasoned or unprincipled. The principle was further highlighted in Kasturilal's case (supra). It was emphasised in Dwarkasis Marfatia & Sons v.Board of Trustees of the Port of Bombay : 1989 (3) SCC 293 that every entity which is an 'authority within the meaning of Article 12 of the Constitution cannot act arbitrarily even in contractual matters and must act only to further public interest. It was stated that all actions including contractual dealings of statutory authorities are subject to judicial review. In Mahabir Auto Stores v. Indian Oil Corporation : AIR 1990 SC 1031, It was held that Article 14 was attracted even where the aggrieved person did not have the benefit of either a contractual or statutory right. Though the impugned act of Indian Oil Corporation was an administrative decision, it was held that it was impeachble on the ground that it w,as arbitrary and as such violative of Article 14 of the Constitution. In Kumari Shrilekha Vidyarthi v. State of U. P. : AIR 1991 SC 537, it 'was pointed out that the personality of the State requiring regulation of its conduct in all schemes by requirements of Article 14 does not under go a radical change after the making of a contract, merely because some contractual rights accrued to the other party. Judicial commitment to openness implies scrutiny of State action to provide an effective check against arbitrariness and abuse of power.